Millions of workers are still earning less than before the financial crash, with wages 2.5% lower on average than in 2008.

The research by the Institute for Fiscal Studies (IFS) economic think tank says George Osborne’s cuts and tax rises have seen the slowest recovery in living standards from any major recession.

Although average household incomes were finally back to the pre crash level, average wages for young adults (22-30) are 7.6% lower than in 2007-08 and for 31-59 year-olds they are 2.5% lower.

The IFS said wages had been held back in part by Mr Osborne’s “tax increases and benefit cuts.”

“After large falls, and a historically slow recovery, average household income is now back to around its pre-crisis level.

“However, the young have done much worse than the old, those on higher incomes somewhat worse than those on lower incomes, and those with children better than those without,” said report author Andrew Hood.

IFS director Paul Johnson told BBC Radio 4's Today programme: "The most remarkable thing is less that incomes fell - incomes always fall during and after recessions.

"The thing that's really different this time to what happened in the 1980s and 1990s recessions is they have taken an awfully long time to recover.

Mr Osborne today said the report showed Britain was growing, and claimed the country was “fundamentally in a better position than it was five years ago."

Also speaking on Today, the Chancellor said: "So the picture you hear, particularly from my political opponents, of the British economy is not one reflected in this independent report - indeed quite the opposite.

"What they show is that Britain is growing, that incomes are rising, that the richest have made the biggest contribution, inequality has fallen ... Britain is fundamentally in a better position than it was five years ago."

He added: "If you look at the rate of progress in the report today, if you look at incomes, they should be higher in 2015/16 than they were in 2010/11, so on that measure as well we will have made progress.

"But I am the first to say the job isn't done, that a lot of damage was done to the British economy and there's a huge job to be done continuing to repair that economy, securing the recovery, not putting at risk all the progress we have made."

Shadow financial secretary to the Treasury Cathy Jamieson said: "This report confirms that working people are worse off since 2010.

"This is set to be the first time since the 1920s that people are worse off at the end of a parliament than at the start.

"Labour's better plan will deliver the rising productivity we need to get sustained rises in living standards for all.

"We need a recovery that reaches kitchen tables across Britain, not one which has left working people worse off."